RIM says PlayBook sale works, but overstock costly

RIM provided mixed details of its attempt to clear excess BlackBerry PlayBook stock. The company revealed that it was taking a provision of $360 million after tax, $485 million before, to account for the worth of its unsold tablets. There was still a "high level" of inventory, the company said.

The company largely admitted that it needed to keep price cuts active for sales to keep going. Its decision to delay PlayBook 2.0 to February was a factor, but it also admitted that "recent shifts in the competitive dynamics of the tablet market" were to blame. The tablet has never had success competing with the iPad 2, but RIM may most of all have to compete with the Amazon Kindle Fire, which is based on the very PlayBook it's competing with but, at $199, costs less than half of RIM's originally intended $499 price.

Accordingly, despite the sale's original December 1 end date, Best Buy is still showing all PlayBooks at the same sale prices.

In taking the financial hit, however, RIM also noted that its sales were finally working. The company shipped just 150,000 PlayBooks to stores during its most recent quarter but, in a rare instance of revealing clues of its actual sell-through, said it had sold these plus cleared some of its backlog. RIM confirmed relatively high demand and note that there had been a "significant increase" since the cuts.

CEO Mike Lazaridis also tried to put down rumors that there were no plans for future tablets after the current PlayBook. The company still saw it as a "compelling" tablet for home users that still had enterprise-friendly features, he said, reassuring developers there would still be a platform to support.

"RIM is committed to the BlackBerry PlayBook and believes the tablet market is still in its infancy," Lazaridis said.

The financial hit still suggests that RIM may still have several weeks, if not months, of inventory to clear for a tablet that it once touted as being a surefire winner versus the iPad. Although touted as a "professional-grade" tablet, many even in its core BlackBerry phone base felt they couldn't use it through the lack of basic features like native e-mail, which despite promises were delayed multiple times. RIM's half-year delay between announcing and shipping the tablet also tarnished its reputation, since the company spent all its energy attacking the original iPad but, because of the interval, ended up competing against a larger, faster iPad 2.

RIM in warning of the cash hit added that its BlackBerry phone shipments were in line with its guidance range at 14.1 million, although the number will see the gap between itself and Apple's iPhone widen even further. Revenue would be slightly lower at $5.3 billion to $5.6 billion, and the combination of the PlayBook writeoff and a $50 million hit from the nearly four-day BlackBerry outage would drop its net profit to about $1.20 to $1.40 per share. It would no longer make its original earnings target of $5.25 to $6 per share.

By Electronista Staff